Why Invest in Timber

• Forest land is an attractive investment form, offering yield, values appreciation, capital preservation and risk diversification
• The returns come from two components – short term low risk cash flow yield and long term value appreciation
• The investment risk is mitigated by the inflation hedge and renewability properties of owning forest land. As trees grow they increase in value. There are no warehousing costs as trees are effectively stored on the stump. Therefore harvesting and sales can be tailored according to the prevailing prices with reduced harvesting an option in depressed markets
• Forest land offers portfolio diversification as the returns have low correlation with investment classes
• Due to the long production cycle, timber supply cannot be dramatically increased in a short time period, as is the case in other commodities such as grain. Forestry is subject to strict regulations scrutiny in the European Union
• The National Council of Real estate Fiduciaries ( NCREIF) index, an index based on the North American forest holdings can be sued as an industry benchmark for returns. The 20-year data show an average return of 15% per annum
• The Kyoto protocol and more recently the Bali conference stipulates a trend towards lowering carbon emissions, with tradable carbon credits being of potential benefit to a forest owner
• A recent trend in the Nordic regions is the proliferation of the both biofuel plants producing cellulosic ethanol and biodiesel and the use of wood as an energy source. The EU 2003 biofuels directive set a target of 5.75% share of biofuels in the overall transport fuel supply. Cellulosic ethanol is produced from wood and has energy yield of between 4-6 times the energy expected during production
• The green business is creating a new and vibrant demand for wood and wood residues
• Price growth has been brisk in the European timber market in 2006 and 2007. This growth has mainly been driven bt construction activites in Eastern and Western Europe as well as in Russia and China. The tariffs and tolls imposed by the Russian authorities in wood exports will increase the demand on timber supplies in the Baltic’s in general and in particular on Estonian supply